Making the most of the Temporary Repatriation Facility (TRF): a strategic window for non-doms
Insight
On 6 April 2025, the UK implemented sweeping reforms to the tax treatment of non-UK domiciled individuals (non-doms), read more here. As well as fundamental changes to the UK’s inheritance tax rules (which we will cover in more detail in a later article), the new rules introduce significant changes to the way in which non-doms living in the UK are taxed on their worldwide income and gains.
The reforms are effectively a tax increase for most non-doms already living in the UK, particularly where they have existing trust structures. However, there are some planning opportunities, in particular, around the newly introduced Temporary Repatriation Facility (TRF). This article focuses on how the TRF can be a valuable tool in some surprising ways for those currently living in the UK, alongside some potential pitfalls to avoid.
Remember: the remittance basis is still relevant!
Prior to 6 April 2025, individuals who were neither domiciled nor deemed domiciled in the UK could take advantage of the remittance basis of taxation, which allowed them to pay UK tax only on i) UK-source income and gains and ii) non-UK income and gains brought into the UK (remitted). Non-UK income and gains were free of UK tax, as long as they were not remitted to the UK.
The remittance basis no longer applies to foreign income and gains that arise on or after 6 April 2025. However, remittances of previously untaxed foreign income and gains will still be taxed if brought into the UK on or after 6 April 2025.
TRF to the rescue
Using the new TRF can allow previously untaxed foreign income and gains to be brought into the UK at lower tax rates. The rate (for both income and gains) will be 12% from 6 April 2025 to 5 April 2027, increasing to 15% from 6 April 2027 until 5 April 2028. These funds can then be brought to the UK without any further UK tax in those three years or any time in the future.
To be eligible for the TRF, an individual must have been taxed on the remittance basis in any previous tax year. The TRF can be claimed by a UK resident taxpayer making a 'designation election' in their self-assessment tax return in respect of their eligible foreign income and gains.
Only pre-6 April 2025 foreign income and gains remitted in the 2025/26 tax year and beyond are eligible under the TRF. Remittances (accidental or deliberate) that have taken place in prior tax years cannot benefit from the TRF and are liable to UK tax at a taxpayer’s marginal rates.
The TRF is not automatic – a formal election must be made. The election must specify the amount and source of designated foreign income/gains. The deadline for making the election is 12 months from the normal filing date. For example, for 2025/26, the normal self-assessment filing date is 31 January 2027, so the TRF election must be made by 31 January 2028.
The TRF: key features
The TRF offers qualifying UK resident individuals a valuable opportunity to regularise historic foreign income and gains on favourable terms. While much attention has been paid to the headline benefits – such as a flat-rate tax charge – the TRF can assist in less obvious but equally important ways. However, while the TRF offers welcome flexibility, it is not without complexity. The table below sets out a summary of the key features of the TRF, along with some key tips and potential traps to be aware of when considering using the TRF:
|
Feature |
Example |
Tip |
Trap
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The TRF applies to overseas non-liquid assets (eg real estate, art).
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Mr A, a previous remittance basis user, has a property in France he purchased using pre-6 April 2025 foreign income and gains. |
Mr A can designate the foreign income and gains used to buy the property under the TRF. He should use clean capital to pay the TRF charge to avoid triggering a taxable remittance (this could include, for example, paying the charge from taxed profits arising in tax year 2025/26 onwards).
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On a future sale of the property, only the amount designated under the TRF can be brought into the UK tax free. Any gain made on the property in excess of the TRF designated amount will be subject to UK tax at Mr A’s marginal rates.
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No credit for foreign taxes paid when claiming the TRF.
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Mrs B, a previous remittance basis user, disposed of non-UK shares in 2023 and has kept the sales proceeds outside the UK until now.
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If foreign tax paid on the disposal was low or nil, using the TRF when remitting the proceeds will be more beneficial for Mrs B than claiming foreign tax credit relief. For example, if the shares were Isle of Man company shares, it would be more advantageous for Mrs B to claim the TRF, as the Isle of Man does not impose capital gains tax on share disposals. Claiming the TRF would result in UK tax of 12% rather than 24%.
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If the disposal was taxed in a jurisdiction with rates similar to the UK, claiming double tax relief on remittance of the proceeds is likely to be more tax-efficient for Mrs B than using the TRF (as there would be no additional UK tax payable). For example, if the shares were Italian company shares, it would be better for Mrs B not to claim the TRF. This is because the top rate of Italian CGT is 26%. A credit of this amount against 24% UK CGT due on the remittance would result in no further UK tax to pay for Mrs B. |
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The TRF can apply to pre-6 April 2025 foreign income/gains in a non-UK trust
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Mr C, a UK resident beneficiary of a non-UK trust, receives a distribution in March 2026 which is matched to pre-6 April 2025 trust income and gains. |
Claiming the TRF could result in Mr C paying tax at 12%/15% on trust distributions, rather than up to 45% for distributions matched to income and up to 38.4% for distributions matched to stockpiled trust gains.
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Mr C must have claimed the remittance basis at some stage in order to benefit from the TRF on the distribution. It is not possible to use the TRF where pre-6 April 2025 trust income/gains have already been fully matched to capital payments made to UK beneficiaries in earlier tax years. If the distribution exceeds the pre-6 April 2025 income and gains, the excess may be immediately taxable at standard rates or may become taxable in the future.
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Designated TRF funds come to the UK first |
Mrs D has an offshore investment portfolio. The portfolio contains a mix of foreign interest income and foreign gains. She would like to be able to bring half of the portfolio into the UK.
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If Mrs D makes a TRF designation over specific foreign income and/or gains within the mixed fund, those designated amounts will be treated as remitted in priority to other foreign income and gains in the fund. This means that she can spend the TRF funds in the UK without triggering tax on non-TRF foreign income/gains. |
If Mrs D brings funds to the UK in excess of the foreign income and gains designated under the TRF, she will need to pay UK tax on any excess at her marginal rates. In addition, she would pay UK tax on any gains realised on the extraction (in addition to the TRF charge), unless she can benefit from the UK's new regime for foreign income and gains. |
Looking ahead
While the reforms mark a significant shift in the UK’s tax landscape for non-doms, they also offer valuable opportunities, particularly the TRF, which allows individuals to bring historic funds into the UK at favourable rates, with greater certainty and flexibility. However, the limited window of opportunity to utilise the TRF means that taxpayers moving from the remittance basis should consider their positions now, including assessing their historic foreign income and gains (including those within offshore structures) and ensuring relevant information is ready to support any TRF designations in their self-assessment tax return.
This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
© Farrer & Co LLP, September 2025
